Is the For Sale By Owner Route for You?
Is the For Sale By Owner Route for You?
For Sale by Owner is a selling option which has always been available to the home owner here in Vancouver and elsewhere, however, due to the proliferation of Internet websites which offer For Sale by Owner "listings", it is much more common and deserves discussion as the risks & consequences of "For Sale by Owner" sales are not always fully understood. While this article speaks specifically to conditions and trends in Vancouver, BC it is probably valid just about anywhere.
Historically, For Sale by Owner homes were limited to marketing their homes in the local newspaper and putting a For Sale by Owner sign in their window. One of the big advantages Realtors in Vancouver have historically had over For Sale by Owner homes was the MLS, a searchable computer database which pooled many listings into one location. A buyer working with a Realtor would be able to conduct a much more concise and efficient search for their new home. The public gateway to this database is located at REALTOR.ca (formerly MLS.ca). This allows the public to search on their own time without a Realtor to get an idea of neighbourhood costs, properties that are available, in addition to numerous other factors that will determine their home purchasing decision. Realtors search the professional version of said database but with much much more access to information (called MLX).
Internet savvy entrepreneurs have recently created a plethora of "we list" websites offering Internet marketing for For Sale by Owner homes.
One key distinction between MLS and the For Sale By Owner listing websites is the accuracy of information disclosed on the site and the legal recourse if said information is inaccurate. Realtors are professionals that are held accountable in the courts as such. In fact, if something was not disclosed because the Realtor was unaware, he/she is still responsible and liable because as a professional they ought to have known about said issue. For Sale By Owner sites have no such duty of care to the buyer. You must also take into account how much the Seller stands to gain by making such a misrepresentation. In Vancouver, it could be hundreds of thousands of dollars or more.
Realtor vs. For Sale by Owner
So you're probably asking yourself at this point, "Isn't it sort of dumb for a Real Estate company to be telling people about this? Won't you lose business?" Well, first of all, our way of doing business is to give clear, honest advice to our clients so that their best interests are served, not ours. We believe honesty and integrity creates happy people, a good reputation and thus increases business. Secondly, while For Sale by Owner may be the best approach for some, it has some significant drawbacks which preclude most people from even considering it. Keep reading for details.
Consumer Protection and Liability
Probably the most serious drawback of a For Sale by Owner is the lack of protection for both the Seller and the Buyer.
All Realtors in Vancouver carry Errors & Omissions Insurance to protect
sellers and buyers in the event of a mistake,
misrepresentation and so forth. But what does this mean to a consumer? Individual home owners, or
the "we list" type websites do not. So, for example, if
you're selling your home For Sale by Owner, and you
mistakenly make an error on the square footage of the
property or some other detail and subsequently get sued by
the buyer, you have no protection, whereas if you're being
represented by a Realtor, the Realtor would get sued and
their insurance generally would cover any loss. A single
mistake could end up costing you far more than a Real
Estate commission. Also, it is important to understand the distinction between a real estate agent and a Realtor. Although both are licensed to sell real estate, the basic difference
between a real estate agent and a REALTOR® is a REALTOR® is a member of the Real Estate Board of Greater Vancouver and of CREA (the Canadian Real Estate Association). As such, the main difference that
you hear a lot about -- but are likely confused about -- is that a
REALTOR® must subscribe to the REALTOR® Code of Ethics.
Realtors, especially those with advanced training, are also aware of the legal requirements & liabilities to both seller and buyer if certain things are not done properly during the sale of a home. Without this knowledge, buyers may end up inheriting some serious and costly issues which they will either end up being responsible for, or which the seller may be liable for. Only someone with proper training in Real Estate Law can offer proper protection from liability. A For Sale by Owner website and seller self representation generally offer no such protection.
Okay, let's say you know all about Real Estate Law, understand your liabilities and are comfortable representing yourself. How effective is "For Sale by Owner" marketing in being able to get you the price you want in the time you want?
The first step in understanding this question is to think like a buyer. Let's say you want a 4 level split style home, with 3 1/2 bathrooms, minimum 1200 square feet, built after 1990, with a fireplace, hardwood flooring and a walk out basement facing south. Now, go to any newspaper or For Sale by Owner website and try and find only those homes which exactly match this criteria. Chances are you'll spend all day reading each listing, calling each owner and end up getting thoroughly frustrated. On the other hand, any Realtor can go to the MLS and produce a list of homes exactly matching the criteria in about 30 seconds.
Because it's easier, more efficient and free, most buyers will use a Realtor. And because most Realtors never take their buyers to homes that aren't listed on the MLS, the vast majority of potential buyers will never even see your house if it's listed for sale by owner. Basic statistics will tell you that you will typically get more money for your house when there are more potential buyers.
Determining a properties list price is very difficult for someone without access to the MLS to determine what other similar houses have sold for. Even an amateur with that access is likely to make rookie mistakes. The result is that many For Sale by Owner listings are not priced properly. Pricing your property too high or too low can cost you money.
In closing, there goes a saying "actions speak louder than words." Read a previous post (HERE) about the founder of ForSaleByOwner.com who tried to sell his condo for 6 months with no luck, who then approached a Realtor who then increased the price by $150,000 and SOLD it for that increased price. Definitely something to think about.
Have an absolutely incredible day!